Cost of Renting: What Can You Actually Afford?
Renting or Buying? What can you afford? Let’s look at the renting affordability. Deciding to move is always a big decision and can be exciting yet overwhelming at the same time. Whether you are renting your first place, moving to a new city, or simply ready for a change of scenery, understanding the costs associated with moving and renting are key to having a seamless transition into your new home. Knowing “How much rent can I afford?” is a great first step in your rental search, and we’ve got the tools and guidelines you need to help answer this question. Understanding “How much is my new place actually going to cost me?” is another important, yet often unconsidered question. There are many hidden costs and benefits to renting, so we’ve given you some tips on what you need to be thinking about from the start.
Aim to spend 30% of your monthly income on rent
The most common guideline for renting is to spend approximately 30% of your gross monthly income, i.e. your paycheck before taxes are taken out, on rent. If it is hard for you to calculate how much you make every month, but you have a better idea of how much you make a year, then you can divide your annual salary (again, before taxes) by 40. You’ll come out with the same number either way! Even better, we’ve made a rent calculator tool for you that will do the hard work for you. Plug your monthly income into the calculator and we will help guide you to an answer on how much rent you can afford.
Factor in property income requirements
Knowing how much you can afford to rent from a budgeting perspective is the first step in finding a place you love and can afford. However, before you start your search it is also important to know that many landlords and property managers require a renter’s monthly income to be 2-3 times the rent to qualify for an apartment. This income requirement is normally an aggregate requirement for all occupants in a rental, so if you are moving in with a significant other or roommate the two of you combined must meet this minimum.
Calculate moving and move-in fees
You’ve found the perfect apartment, you can afford the rent, and it has great perks! Then all the fees of moving in start piling up, and your budget is on the fritz. Keeping these common moving and move-in fees in mind can be really helpful to make sure you’re financially prepared for your big move. Below are our guidelines, but always make sure you double check any fees before signing you lease.
- Deposit: Putting down one month’s deposit, i.e. the amount you pay for rent in a given month, is very standard. Sometimes rentals will require first and last month’s rent along with a security deposit. Keep in mind, a deposit is just that – you should get it back once you move out as long as your place is clean and nothing major is broken.
- Application fees: Paying to submit your application is a common practice for rentals – it helps ensure only serious renters apply. Fees range all over the place, and can be per application, per person, or completely waived. We looked at over 15,000 properties and summarize the breakdown of fees below to give you some idea of what kind of application fees you can expect to pay.
- Pet fees: Moving with a pet can be costly, so it is important you understand all the fees up front. These can range from a pet deposit, which you should get back when you move out, to monthly pet rent, which you pay every month so your furry friend can enjoy living in your apartment as well, to a non-refundable pet fee, which is a one time cost for letting your pet move in with you. Make sure to ask about all fees so there are no surprises if you are bringing Fifi or Fido along.
- Moving fees: While not directly tied to your property, all the money you pay to move can really add up. Using movers? They can cost hundreds of dollars. Getting new furniture? Even Ikea pieces can cost a pretty penny. And don’t forget about all the spices, Tupperware, cleaning supplies and other little things you decide you don’t need to pack up and bring with you but now need to buy again.
Consider the hidden benefits and costs
Knowing how much you can afford to spend every month on rent is essential to finding your next home, but most renters forget to consider the true costs of renting. What do we mean by this? We mean the additional costs or benefits a renter incurs by choosing to live in a specific place. These costs can add up and make a significant impact on personal finances in the long run, so factoring them into your choice at the start can save you lots of money and stress. We cover a few of these costs below that are worth considering when choosing to rent somewhere.
- Commute: Time is money, and most adult Americans spend at least some time commuting to and from work each day. Nationwide, one in 36 commuters travel more than 90 minutes one way to get to work, and these super commuters are on the rise, up 15.9% from 2.4% in 2005 to 2.8% in 2016. This means nearly 4 million people across the US are spending hours commuting every day. Finding a home close to work can save you hours in the car, leaving you with more personal time to enjoy your home, family, and friends.
- Transportation: Proximity to public transportation is another factor many renters should consider when choosing a place to live. If taking public transportation is your main mode of getting around, how close you live to a bus, subway, or bike share can be a huge perk, or downside if you’re far, to your new apartment. Even if you own a car, knowing that you have options for getting from A to B can be a value-add for any rental.
- Parking: If you have a car, you know it isn’t cheap, and you want to take care of it. Having a designated parking spot or covered garage can bring peace of mind to car owners, and should be a factor in deciding which place is best for you when you move. If you live somewhere where parking isn’t a problem and cars are safe on the streets, this may be less of a concern, but if you live in a crowded metropolis parking with your apartment could be a big plus. Paying for a parking spot can also be expensive, costing several hundred dollars a month in some cities, so when it is included as part of rent this can be a significant financial benefit.
- Amenities: Some apartment communities offer an extraordinary amount of amenities. Want to lay out by a pool on the weekends? Check. Need a quick workout in the mornings? Check. Want to host a barbecue for all your friends? Check. While these amenities might seem like the icing on the cake for your rental, they actually might be saving you lots of money as well. Gym memberships are often expensive and fees recur on a monthly basis. Unless you have a free public pool nearby access to a country club or other private pool can be costly. Finding a space to rent for a party is never cheap. Having awesome amenities at your disposal for free can not only cut down on other costs, but the convenience of such amenities might also encourage you to use them more often than you would otherwise.
- Schools: For parents and students alike, being close to school makes life so much easier. Whether proximity lets you roll out of bed right before class or save time dropping the kids off in the morning, it’s a big benefit. If your children attend public school, making sure your new place is in the district of your choice or on the school bus route can also be a big factor in choosing a home that, while doesn’t impact your rent, can have a huge impact on you and your family’s life.
- Renovations: Sure, old building have charm and character that newer builds sometimes lack. Plus when you’re renting your landlord takes care of maintenance and fixing broken appliances, right? While this is normally true, dealing with old plumbing, broken washing machines, failing fixtures is a huge pain. Your landlord might be busy, or slow to respond. Finding a place with new appliances or that has been recently renovated can help alleviate some of this frustration, and is worthwhile to keep in mind. At the very least, make sure to check all the appliances at your new place thoroughly before signing a lease.
sent in by Justin Chaplin, Apartment List
written by Stephanie Soderborg. Stephanie is Director of Growth and Content Marketing at Apartment List. She has a MA in Communications from Stanford, and previously worked in international economic development.
Here are two more articles by Apartment List to consider also:
Both articles written by Chris Salviati. Chris is a housing economist at Apartment List, where he conducts research on economic trends in the housing market. Chris previously worked as a research assistant at the Federal Reserve and an economic consultant, and he has BA and MA degrees in economics from Boston University.